smes and business

Often the hardest part of starting a business is raising the money to get going. The entrepreneur
might have a great idea and clear idea of how to turn it into a successful business. However, if
sufficient finance can’t be raised, it is unlikely that the business will get off the ground.
Raising finance for start-up requires careful planning. The entrepreneur needs to decide:
 How much finance is required?
 When and how long the finance is needed for?
 What security (if any) can be provided?
 Whether the entrepreneur is prepared to give up some control (ownership) of the start-up
in return for investment?
The finance needs of a start-up should take account of these key areas:
 Set-up costs (the costs that are incurred before the business starts to trade)
 Starting investment in capacity (the fixed assets that the business needs before it can
begin to trade)
 Working capital (the stocks needed by the business –e.g. r raw materials + allowance for
amounts that will be owed by customers once sales begin)
 Growth and development (e.g. extra investment in capacity)
One way of categorising the sources of finance for a start-up is to divide them into sources which
are from within the business (internal) and from outside providers (external).
Internal sources
The main internal sources of finance for a start-up are as follows:
Personal sources
These are the most important